Sunday, August 30, 2009

A recent piece in FCW from Dee Lee, now executive vice president of federal affairs and operations at the Professional Services Council (PSC), highlights the need to temper acquisition workforce analysis with action.

Her piece is a follow up to her Aug. 5 testimony before Congress to discuss the multi-sector acquisition workforce, and according to Ms. Lee, her first testimony as a member of the private sector. Her work with the PSC will hopefully help guide the discussion on acquisition workforce reform forward, and to help Congress acknowledge that much more needs to be done and quickly, as the acquisition mission continues to falter as a result of breakdowns in the workforce.

…We do not need more reviews or competency studies, further discussions on who belongs in the acquisition workforce, or arbitrary new hiring goals. What we need is action.

The government must plan for and manage a multisector workforce. Strategically established, well-defined approaches for hiring the right people for critical agency functions and awarding and managing the right contracts and grants are crucial to mission success…

I could not agree more. Ms. Lee advocates the for the Office of Federal Procurement Policy (OFPP) to define the federal acquisition workforce to be capability-based workforce, much like my advocacy of the acquisition workforce being composed of a broad range of skills necessary for successful acquisitions — to include program management, contracting, and requirements. Although this may fall into the “who belongs in the acquisition workforce,” this strategy nonetheless will be more successful to create a lifecycle approach to acquisitions and thus outcomes.

Ms. Lee further advocates integration of the oversight role in the acquisition team and the government’s continuous improvement process. The acquisition process is ripe for process improvement, and the use of six sigma techniques could go a long way to streamlining processes. This process improvement should also include streamlining the layer after layer of review cycles that extend acquisition timelines by many months or years. However, crucial to execution is leadership, and as Ms. Lee also points out, strong leaders are needed now for OFPP administrator and General Services Administration administrator to provide the necessary guidance and vision to really move forward on effective change strategies and to communicate what is needed to see results.

…Ensuring the proper execution, oversight, accountability and effectiveness of federal acquisition requires policies that balance advance planning, resources and compliance. Those policies must be based on sound data and thoughtful debate rather than on anecdotes or headlines and must focus on actions that will truly improve performance and results rather than adding layers of non-value-added processes or reviews.

Developing a well-trained and well-supported acquisition workforce is the single most important ingredient for success. Delivering on that message will do more to strengthen the federal workforce than almost anything else…

It is this last point that is vital to understand acquisition reform. A people first strategy; with subsequent tools to hire, train, and retain talent, will do more to foster an environment for success in acquisition outcomes than almost anything else. Action is indeed needed now.

Follow Up: Dee appeared on the Amtower Off-Center program on Federal News Radio 1500 AM yesterday to discuss these issues and the state of federal acquisition. You can listen to the interview here

Tuesday, August 25, 2009

An interesting action plan for speeding up the procurement process for Recovery procurements was recently proposed by Dr. Allan Burman, who served as administrator of federal procurement policy in the Office of Management and Budget. His plan, which was conducted as an interview with CGI Initiative for Collaborative Government, outlined an approach where agencies could expedite their stimulus awards by implementing a system of performance-based contracting proven effective in the private sector.

The vital component of the plan is the creation of “tiger teams” being referred to by Dr. Burman as "contracting officer performance representatives," as opposed to the traditional contracting officer technical representatives or COTRs. These commando teams would operate much like an integrated product team, with representatives of various functions and stakeholder teams providing holistic input into a procurement. These teams would have experience in performance-based acquisition (PBA), where agencies focus on the capabilities and outcomes of what is needed, allowing industry to propose innovative solutions to addressing the requirement in hopes of achieving best value and achieve more effective buying. Further, these performance representatives are envisioned to help develop requirements and provide the oversight needed for many services-based stimulus contracts on various procurements at an agency.

The process proposed by Dr. Burman begins by getting the tiger teams and stakeholders (e.g. agency procurement officers and program representatives) in a room together for a quick training session of a couple of hours to explain what is PBA. The group would then spend some time, presumably another couple of hours, working on a pilot project to test their new training and to increase their proficiency with PBA methodology. The team would then be cut loose to begin to focus on the actual stimulus procurement, and outline the business outcomes, objectives, metrics, performance measures, and the level of Government oversight required. Further, this would also include incentives and if they should be included into the contract. All of these activities are to be completed in two-and-a-half days as described, with the end result an accountability matrix which outlines what the agency is procuring (e.g. outcomes and capability).

The initiative outlined by Dr. Burman helps achieve desired outcomes of enhanced competition, encourage small business participation, and increase transparency. Certainly if this process could be executed, it would go a long way towards achieving desired objectives. However, I think the reality of the federal procurement process has inherent flaws and problems that make this approach difficult to implement.

Although I too agree that PBA is one of the best contracting methods to achieve cost, schedule, and performance goals, I do not agree that this approach is as feasible as Dr. Burman believes it to be. I do not believe that a few hours of training will allow personnel to convert needs into outcomes. Personnel must have a sufficient proficiency level to execute PBA initiatives, which will simply not be obtained in a couple of hours. The acquisition workforce is not sufficiently trained in PBA methodology for this initiative to be successful, which is confirmed by recent surveys from the acquisition workforce themselves indicating PBA is still a capability gap throughout Government. Further, these tiger teams would have to be dedicated to this task, going from contract to contract as Dr. Burman outlined. My concern here is that these tiger team members would need to be seasoned experts with vast experience in PBA, contracting and program management, in addition to training. Finding enough of these procurement veterans may be an issue, unless a small group jumps from agency to agency. With the difficulties in acquisition workforce hiring and retention, I am not sure what kind of impact these teams could have given the demands on the workforce and the amount of Recovery actions currently being prepared and those that remain on the horizon.

Another recommendation that Dr. Burman discusses is to improve communications with industry, which I do think is a vital component that needs to be done more proactively to help improve acquisition outcomes.

Getting procurement requirements right takes lots of good communication, not just internally but also with the private sector, so you can make sure you know what you’re looking for. One approach is for agencies to invite contractors to come in before they submit proposals to have due diligence discussions to gain clarity about requirements. This kind of communication helps level the playing field for potential bidders, particularly if an incumbent contractor has performed the work for many years. Of course, agencies need to be careful not to provide procurement-sensitive information or give any one bidder an unfair competitive advantage.

This approach has many benefits, such as improved market research, requirements validation, and possible increases in competition. However, many procurement offices have become very risk averse. Although the Federal Acquisition Regulation (FAR) encourages exchanges with industry (FAR Subpart 15.201), exchanges with industry are incorrectly seen as favoritism, increase possibilities of protest, or simply seen as improper or having the appearance of impropriety. Further, Dr. Burman encourages the use of draft request for proposals, in which the agency makes a "good-faith effort to identify its needs and alerts potential bidders" to its desired outcomes. This is another effective tool for requirements validation and exchanges with industry, but the main culprit here with why they are not used is because of time-pressures and the glacial pace of the current acquisition process. Contracting Officers feel that they simply do not have the time in the current environment, and must keep moving procurement actions forward.

These issues really focus around culture and the current process which is completely ineffective. If procurement processes are to be analyzed for possible improvements, one area that can be improved is the layer after layer of procurement package reviews. With all the different review cycles, the required approvals for a typical procurement can be many months. This is even worse for major acquisitions, where the review process and final procurement action can take years. For technology buys, the Government often finally buys out-of-date solutions where innovation was needed or wanted to improve operations. Although I appreciate the approach Dr. Burman outlines, perhaps the tiger teams can be used to speed up the review process. I often cringe when I am developing Work Breakdown Structures for my clients and I have to account for 3-4 months of review time for procurement packages. This does not even account for possible rework and re-reviews, which could add another 2-3 months of lead time. Half a year in reviews is inexplicable, but often common practice across Government.

Nonetheless, with the right mix of skills, personnel, and training, Dr. Burman’s approach could go a long way to improve acquisition outcomes by focusing on defining the right set of requirements, in the right way, and with the help of the right audience and stakeholders. I just hope that the endemic problems in the federal acquisition process can be resolved if worthwhile initiatives like Dr. Burman’s can come to fruition and be successful.

In a continued effort to do more with less, a recent report by the Government Accountability Office (GAO) discusses the efforts by the U.S. Coast Guard (USCG) since assuming the role of systems integrator (SI) for the overall Deepwater Program. Admiral Thad Allen has done a tremendous job since assuming his role as Commandant of the USCG, and the GAO report illustrates both the challenges and successes the USCG is having since assuming the SI role, previously held by Northrop Grumman/Lockheed Martin owned Integrated Coast Guard Systems (ICGS).

Understanding that the previous failures in Deepwater were a function of poor management by both ICGS and the USCG, the USCG began its work as the SI by reducing scope, and assigning these functions to Coast Guard stakeholders as significant cost overruns could not be sustained with an existing scope of such magnitude. Further, the USCG has undertaken a fundamental reassessment of the capabilities, number, and mix of assets needed, including finding ways to increase competition and cost reductions by allowing future work on individual assets to be potentially bid competitively outside of the existing contract held with ICGS.

One reason the USCG hired an SI contractor to begin with was in part because of the acknowledgement that it lacked the experience and depth in workforce to manage the acquisition internally. Any chance of success to develop and manage such a vast program such as Deepwater clearly needed outside contractor engagement. Further complicating the issue is the same issue across the federal government; continuing challenges hiring and retaining qualified acquisition personnel with subsequent risks to the successful execution of its acquisition programs. Also like most of the federal government, retooling the acquisition workforce continues in parallel with increased reliance on support contractors to complete the acquisition mission.

The USCG is definitely on the right path, but persistent challenges remain as reported by GAO. Improvements have been made to create a disciplined management process in line with the USCG Major Systems Acquisition Manual (MSAM), but the goal of aligning all Deepwater assets by the end of March 2009 was not reached. One example cited in the report was that operational requirements documents and test plans are not in place for assets with contracts or orders recently awarded (such as the Fast Response Cutter and C4ISR) or in production. This lack of oversight will clearly hinder reaching cost, schedule, and performance objectives.

Budgetary issues are also on the front burner in taking over its programs, and creating budgets and cost schedules on realistic estimates. USCG officials stated the previous baseline determined by ICGS did not reflect a traditional cost estimate, but rather the anticipated contract costs as determined by ICGS. As the USCG continues to develop its own cost baselines, it has become apparent that costs will increase, to the tune of $2.7 billion. I just wrote about the need to create realistic cost estimates, so here is more evidence substantiating that position. As more cost baselines are developed and approved, the USCG can further see the underestimates created by ICGS, and is expecting likely cost growth in its assets. Further revealing how ICGS was managing the program, updates to the asset baselines indicate schedule slips for several of the assets, in addition to finding out that details of their budget submission to Congress at the asset level did not include estimates of total costs and total numbers of assets procured. Although USCG took the GAO recommendations under advisement as they feel they are complying, one area that can be improved is collaboration on major acquisition programs with the Department of Defense (DoD), specifically with budget submission since DoD acquires similar systems and must follow similar processes. Perhaps another example of where social media tools to collaborate and transfer knowledge can be beneficial to improve operations at both agencies.

The USCG is making tremendous strides in how it manages its assets and the Deepwater program, with one of the overarching issues being the continuing need to strengthen its acquisition workforce. The continued application and improvement of the disciplined management processes inherent in the MSAM will also be beneficial to ensure that Deepwater assets are designed and delivered to meet mission needs. Managing Deepwater is not an easy business, but continued oversight and risk mitigation by the USCG will hopefully help continued improvements in managing the largest acquisition ever undertaken by the agency.

Sunday, August 9, 2009

In light of the recent memos by the Office of Management and Budget (OMB) to improve government performance and save on contract costs, focus has turned to the use of award fees on incentive contracts. Earlier this week, the Senate Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security held hearings to investigate the issue with leaders at the Departments of Defense (DoD), Energy (DOE), Health and Human Services (HHS), and Homeland Security (DHS) and the National Aeronautics and Space Administration (NASA) who constitute the vast majority of spending on award fee contracts. Further, the Government Accountability Office (GAO) did a thorough analysis of the issue, which shows a path to follow, makes recommendations on fixing these issues, but more importantly, lays out the case through cost findings that can translate into real savings.

According to the GAO, current practices for using award fee contracts were inconsistent with the OMB guidance. However, where the revised OMB policies have been applied, the results have been hundreds of millions of dollars in cost savings and better use of government funds. GAO cites one main issue, which is the limiting of second chances for contractors to earn fees not awarded in a previous period. The report states that eliminating unearned fees in eight programs will save DoD over $450 million through fiscal year 2010. The question now becomes what needs to be done to realize savings of this magnitude?

The analysis also indicates that consistent use of award fees are not being implemented across the various agencies within DOE, HHS, and DHS, and these agencies have developed their own internal, disparate approaches to using award fees to the point that very little standardization or understanding of any accurate policy has taken hold. The DoD is the only agency that collects data on the use of award fees. However, this data collected is not being used to evaluate the effectiveness of award fees, but to create paperwork to respond to legislative requirements to Congress. As such, these agencies have stated in their testimony that they generally do not have methods to evaluate the effectiveness of award fees, and that identifying metrics to compare performance across programs would be difficult. Further, GAO found effective practices within some agencies, but the lack of a government-wide or, with the exception of DoD, agency-wide forum to share information or have standard policies remains a potential risk to acquisition programs.

The overall theme of the testimony by agency officials was that further regulations would continue to burden an already difficult situation for the acquisition workforce. As expected, mandated in the 2009 National Defense Authorization Act are these new rules to link award fees to contract outcomes, with the Federal Acquisition Regulation (FAR) Council to prepare these new rules to in late September or October. The new rules will also mandate the collection of more data on award fees and evaluating whether the awards work. I agree with the agency officials that the regulations and guidance already exist, and what is needed is to adhere to these already established parameters that will help improve performance and create real cost savings.

In regards to the regulation, FAR 16.4, Incentive Contracts, describes incentive contract types, award fee usage, and under what circumstances. However, the real key to this issue is the OMB guidance, which describes the overall parameters of using award fees. The agency officials have agreed to establish an interagency working group to determine how best to evaluate the effectiveness of award fees as a tool for improving contractor performance and achieving desired program outcomes and to develop methods for sharing information on successful strategies, in addition to standardizing the use of award fees using OMB guidance as the foundation for the consistent application of theses award fees.

Award fee contracts, when administered properly, can motivate contractor performance when certain principles are applied in the OMB guidance. These principles include linking fees to acquisition outcomes to ensure that the fee being paid is directly related to the cost, schedule, and performance metrics. Further, limiting the opportunity for contractors to have a second chance at earning previously unearned fee in a subsequent period (e.g. rollover) maximizes the incentive during an award fee period, but also is where the cost savings can have significant impact. Under very limited circumstances should rollover be allowed, because it dilutes the intent of motivating performance since the contractors will simply view the fees as a future target and perhaps not live up to expectations. These missed award fees can be used for other areas, with the subsequent cost savings that go with it. Additionally, no fee should be paid for performance that is judged to be unsatisfactory or does not meet contract requirements, or even satisfactory for that matter. I am not a proponent of providing significant award fees for meeting requirements, as the point is to motivate better than average performance which improves operations, efficiencies, and is what the government is seeking. Satisfactory performance should earn considerably less than excellent performance; otherwise the motivation to excel is negated. Of course some fees will be paid to contractors for satisfactory performance so they receive an adequate fee on contracts. Regretfully, that award fee percentage seems to be too high on current contracts. If the contractor will simply be meeting requirements, where is the motivation or justification to pay significant award fees?

Finally, it is the sharing of information that is also vital to communicating the strategy and the process for the use of incentives contracts. Agency officials have stated that the communication factor is a hindrance to improving the use of award fees, but the use of social media, also known as Web 2.0 or Gov 2.0, is a powerful tool that should be exploited to solve this issue. The main benefits to be solved would be enabling effective collaboration and teamwork, especially among disparate teams and across agencies. Further, the transfer of information will be critical to prevent the current process of different agencies, and different departments within an agency, creating their own rules since they are unaware of guidance or standardized procedures. Of course, one of the biggest issues with Web 2.0 is security, and I hope that issue is solved as simply restricting access to these tools is counterproductive and impedes progress on a powerful tool to help improve government knowledge transfer, and thus performance.

I believe the issue of award fees is a good example where further regulation can only hinder vice help. Existing regulation and guidance only need to be fully exploited and executed upon to realize change. I hope that Congress revisits this concept, and does not simply make more work and further unnecessary regulation for regulations sake.

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About Me

Mr. Gracia is President and CEO of Seville Government Consulting. He is an experienced consultant in government contracting and procurement processes, focusing on small business and government clients. He has 20 years of professional experience providing consulting support for the acquisition, training, and management of services and technology in the government and commercial sector including numerous DoD and Federal civilian agencies. He is a Navy veteran, actively supporting military organizations such as the USO, Soldier's Angels, and serving as CFO for Cigars for Warriors.